Economy debate: Three very different world views

"There is such a thing as the economy. It's just not the same as the state." In effect, that was David Cameron's pitch tonight - his way of explaining why cutting government spending would not be a threat to growth. In many ways, it's a more telling representation of the Conservatives' philosophy than Mr Cameron's better-known slogan about society.

When it comes to growth, David Cameron thinks government is the problem. He thinks the sheer growth in size of government over the past decade has not just put our credit rating at risk: it's put our future growth at risk, by stifling productivity and growth.

From almost his opening words in this debate, Gordon Brown showed that he took precisely the opposite view. "Don't believe that we can fail to support the economy this year," he said. Government isn't the problem, he says - it's the solution. It was government - his government, incidentally - that helped Britain avoid another Great Depression. And it will help maintain the recovery as well.

Even when he admitted that there would be cuts in spending after 2011, he found a way to remind us of the good side of Labour's massive spending spree since 2001. We can cut public investment, he said, "because once you've built a school, you don't need to build it again." And, he said, once you've raised public-sector pay, you can control it.

As ever, this basic difference on the proper size and role of the state is the key dividing line between the two largest parties in Westminster - and not just when it comes to their spending plans for this year. It helps explain why the Conservatives want to raise taxes less than do Labour - or the Liberal Democrats. And why they want more spending cuts instead.

On paper, the Liberal Democrats are much closer to Labour than the Conservatives on this point: they would raise taxes by £20bn to cut the deficit, compared to £24bn for Labour and £14bn for the Conservatives. But you didn't get the same clear rhetoric from Mr Clegg tonight. His big message on the economy - if there were any - was the need for a "fairer" tax system, with the radical reforms that his party has called for. The IFS is still trying to decide whether all those ideas, taken together, would actually achieve the shift in fairness that he suggests.

So, no news on how they would cut the deficit. Surprise. But plenty of evidence of their very different world views.

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China's shadow banking system is out of control and under mounting stress as borrowers struggle to roll over short-term debts, Fitch Ratings has warned. The agency said the scale of credit was so extreme that the country would find it very hard to grow its way out of the excesses as in past episodes, implying tougher times ahead. "The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation," said Charlene Chu, the agency's senior director in Beijing.

China's shadow banking system is out of control and under mounting stress as borrowers struggle to roll over short-term debts, Fitch Ratings has warned. The agency said the scale of credit was so extreme that the country would find it very hard to grow its way out of the excesses as in past episodes, implying tougher times ahead. "The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation," said Charlene Chu, the agency's senior director in Beijing.

The government managed to get us passed the "fiscal cliff." But they did so by creating three more smaller, but still substantial "cliffs." And according to Morgan Stanley's Vincent Reinhart we're likely to go over one of those cliffs, and it's unclear what the consequences will be.